[SatNews] “We are very excited about the transaction, and we anticipate that the merging of our complementary product lines will benefit both companies and our customers.”
CPI International Holding Corp. and its wholly owned subsidiary CPI International, Inc. (CPI), a leading provider of microwave, radio frequency (RF), power and control solutions for critical defense, communications, medical and other applications, today announced they have entered into a definitive agreement to acquire the Codan Satcom business from Codan Limited (ASX: CDA). Codan Satcom is a prominent supplier of solid-state RF subsystems for satellite communications services to commercial and government end users. Codan Satcom has operations in Newton, South Australia and Boalsburg, Pennsylvania.
Under the terms of the agreement, CPI will acquire Codan Satcom for a payment of $9.0 million in cash, subject to certain adjustments, to be funded entirely from cash on hand. If certain financial and other objectives are achieved in the two years following the acquisition, CPI has also agreed to make additional earnout payments to Codan of up to $4.5 million. CPI will acquire certain of the Australian-based assets of Codan Satcom, as well as Codan Satcom’s Pennsylvania-based Locus Microwave operations. The Pennsylvania-based operations were formerly Locus Microwave, Inc., a manufacturer of microwave radio products for satellite communications, before that company was acquired by Codan Limited in April 2009.
CPI intends to integrate the Codan Satcom business into its Communications & Medical Products Division in Ontario, Canada. The Australian-based operations of Codan Satcom, which design and manufacture C-band and Ku-band subsystems and block-up converters (BUCs), will be relocated to CPI’s existing Canadian facilities over a period of approximately nine months. The Pennsylvania-based Locus Microwave operations, which design and manufacture X-band and Ku-band BUCs, primarily for military communications applications, will remain in their current location and are expected to expand as CPI increases the capabilities of those operations. CPI plans to retain a number of key research and development personnel from the Australian-based operations and establish a local engineering center for these employees.
“Codan Satcom has been recognized as a well-established world leader in solid-state RF subsystems for satellite communications for many years,” said Joe Caldarelli, chief executive officer of CPI. “They have successfully served a global base of customers with specialized products and world-class manufacturing expertise. CPI and Codan Satcom serve many of the same commercial and military communications customers, and Codan Satcom’s excellent reputation and worldwide coverage will both complement and expand CPI’s current business in the satellite communications market. With the addition of Codan Satcom’s BUCs to CPI’s existing portfolio of solid-state and vacuum electron device-based satellite communications products, we believe CPI will offer customers the most complete line of satellite communications amplifiers operating at all satellite uplink frequencies and power levels.
Additionally, Codan Satcom’s Locus Microwave operations have developed excellent product coverage for X-band military communications applications, which are widely expected to enjoy significant growth over the next several years as numerous dedicated government X-band satellite communications networks, including the Wideband Global Satellite Communications (WGS) network, are deployed.”
Donald McGurk, managing director and chief executive officer of Codan Limited, stated, “As we evaluated strategic alternatives for our Satcom business, Codan’s key objective was to ensure that we found a buyer who had the focus, resources and desire necessary to nurture and grow the satellite communications business to its fullest potential. We feel that we found that buyer in CPI, and we are confident that our customers will continue to be served well under their management. Sharing many of the same values and goals as Codan, CPI has the required expertise in manufacturing high-quality RF products, a global sales and distribution channel and decades of experience in providing excellent customer service for the demanding satellite communications market. We are pleased that Codan Satcom is being acquired by CPI.”
The acquisition of Codan Satcom, which is expected to close by the end of June, is projected to contribute approximately $20 million in sales to CPI annually. Once the relocation of the Australian-based operations has been completed and excluding the impact of purchase accounting, the acquisition is expected to be accretive for CPI. The acquisition is subject to customary closing conditions.
Dear Codan Satcom Customer:
We are pleased to inform you that Communications & Power Industries LLC (CPI) will acquire the Codan Satcom business of Codan Limited. Under the terms of the agreement, which was announced today, CPI will acquire certain assets of the Australia-based operations of Codan Satcom and the U.S.-based Locus Microwave operations. The Australia-based operations will be relocated to CPI’s facilities in Ontario, Canada over a period of nine months, but the Locus Microwave operations will remain in their current location. Additionally, CPI intends to establish an engineering office near Codan Limited’s current location in South Australia for key research and development personnel. Codan Satcom will be integrated into CPI’s Communications & Medical Products Division, which designs and manufactures similar products in Ontario, Canada for the satellite communications market.
We are very excited about the transaction, and we anticipate that the merging of our complementary product lines will benefit both companies and our customers. We believe that CPI – a leading provider of microwave, radio frequency, power and control solutions for critical defense, communications, medical and other applications – has the focus, resources and determination necessary to nurture and grow Codan Satcom’s products and technology to their fullest potential.
The transaction will combine Codan Satcom’s innovative solid-state satellite communications products with CPI’s expertise in manufacturing state-of-the-art radio frequency products, global sales and distribution channels, and decades of experience in providing industry-leading products and customer service to the satellite communications market. CPI is known for its focus on advanced technology and best-in-class customer responsiveness, two qualities that we expect will serve Codan Satcom’s customers well. Importantly, with the addition of Codan Satcom’s solidstate RF subsystems to CPI’s broad portfolio of solid-state and vacuum electron device-based satellite communications products, CPI will offer customers the most complete portfolio of satellite communications amplifiers in the industry, capable of operating at all satellite uplink frequencies and power levels.
We recognize that Codan Satcom’s customers have been critical to our success. We plan no interruptions in any scheduled or committed rollouts. We intend to honor all existing agreements with customers and will assist you in transitioning to work directly with CPI for future orders.
In order to ensure that there is no interruption in our service, we are planning a nine month, multi-step process to transition manufacturing capabilities from Codan Satcom’s facilities in South Australia to CPI’s facilities in Ontario, Canada. During this transition period, we will continue manufacturing operations in South Australia and North America that will enable us to provide an uninterrupted supply of our products. Once the manufacturing capabilities for each of Codan Satcom’s products have been sufficiently established at CPI’s facilities, we will transition the manufacturing of that product to Ontario, Canada. It is our intent to make this transition process seamless and painless for our customers.
The transaction is expected to close by the end of June. Until then, Codan Satcom and CPI will remain separate and independent companies and will conduct business as usual. You can learn more about CPI at.
We look forward to speaking with you about this matter in the near future. As always, if you have any questions on this matter, please do not hesitate to ask us.
Sincerely,
Bob Carpenter
Division President
Codan Satcom
Tony Russell
Vice President of Microwave Operations
Communications & Power Industries LLC
Communications & Medical Products Division
